Car Buying Tip #7 - Typical Car Dealership Payment Plans

I'm sure this is going to be a rather controversial article for any car dealer employees that read this, so the feedback should be interesting.

The most common pay plans that I've seen start a sales persons commissions at 25% of the front end gross profit. So if the dealer buys a car for $9500 and does some repairs and a detail for $500, they'll own the car for $10,000. Most dealers will have a pack on top of that, a non commissionable profit paid directly to the dealer, which varies, but usually falls in the $500 range.

In this scenario the sales person is starting with a base cost of $10,500 and let's say the sale price on the vehicle is set at $15,995. In a perfect sales persons world that would be a $5495 front end gross of which he/she would be paid 25% or $1373.75.

Wow!!! They make that much? Not quite. Deals like that don't happen as often as some might think. With new cars for instance, more often than not a sales person will be paid a mini. A mini is a flat amount paid to a sales person when the commission amount is below the set "mini." Most dealers will have a mini of $100. I've seen some higher and some a little lower, but that's the most common.

Keep in mind, the national average for car sales people is roughly six to eight vehicles sold per month, and not many sales people are getting rich in this business. Personally, I always let the sales person know that I am going to tip them if they can make the process quick and get to the price I want.
I'll typically tip $100 to $200. It may sound like a lot, but if the sales person was able to help me find the right vehicle, quickly negotiate invoice price, and was pleasant in the process, then I think it is worth it. Be careful not to let the dealer know this if you decide to go this route, because the sales person will lose their job.

Most dealerships will have some sort of incentive for sales people to sell a bunch of cars, and usually comes in the way of increased commission percentages for a certain amount of units sold in a month. The most common I've seen, will up the percentage to 30% at ten sold units and go to 35% at thirteen to fifteen sold units for the month. This is usually retroactive and will pay the higher percentage all the way back to deal one for the month.

There are usually bonuses that car dealerships will set for the sales people as well. Sometimes it's a volume bonus, sell 15 vehicles and get a $250 bonus, or some quirky ones like a $50 "spiff" for getting a customer to climb into a trunk and close the door to demonstrate the glow in the dark child safety trunk release. Unless you are one that doesn't embarrass easy, please don't do this. Trust me the whole dealership will be watching.

Your average sales person, not working for a high end dealership, will make between $35,000 and $45,000 per year. Most people tend to believe cars salesmen make much more, but this seems to be the average range for most sales people I've known.

There are exceptions. I've known really good sales people that earn over $200,000 a year. A really good sales person working at a higher end dealership (BMW, Mercedes, Lexus, etc.) can easily make $200,000 a year with the top earner I've ever met making over $300,000 per year. Big money!

Use this information how you see fit, just please keep in mind most car sales people are not bad people, and certainly don't deserve to be treated that way even if you've had bad experiences in the past. Remember if you don't like who you're dealing with you can always leave or request a new salesperson.

As for the rest of a dealers retail staff, i.e. Sales/Desk Managers, Closers, GSM's, GM's, Finance Managers and Owners, their pay can vary widely depending on the dealership.

A typical Sales or Desk Manager will make roughly $6,000 - $12,000 a month, a Closer (often times is the Sales/Desk Manager) will make the same $6,000-$12,000 a month, a General Sales Manager will make roughly $10,000-$15,000, a General Manager will make roughly $15,000-$30,000 a month, and Finance Managers will make roughly $5000-$12,000 a month.

For Owners, their pay can vary even more. Smaller dealership Owners can make a few thousand dollars a month, while large dealership Owners can make up to, or more than, $1,000,000 a year in pay. As I said it can vary widely, and typically depends on the size of the dealership. Higher volume dealer = more money, lower volume dealer = less money.

If you're afraid of a car dealership making a bunch of money from you on your next car visit CarsDirect. They Guarantee the lowest prices on new cars, trucks, and SUV's. You're also able to bypass any car dealership sales people. It's a great site, they'll show you MSRP, invoice and their
Guaranteed low price. Check it out.

In the mean time...

Take Care and Beware,
J the Car Guy